Rural Bankers Deepen Bearish Outlook on Farmland Values
Feb 19, 2015
Rural bankers are becoming increasing negative on their local economies and farmland values, according to the monthly Rural Mainstreet survey conducted by Dr. Ernie Goss, Creighton University. The survey's Rural Mainstree Index (RMI), which ranges from 0 to 100 with 50 equal to growth neutral, for February slumped from January's weak reading of 50.9 to 46.4 in February. "Weaker exports and lower energy and grain prices continue to weigh on the rural economy that is dependent on agriculture and energy," says Goss.
The farmland and fancland-price index for February was unchanged from January's tepid 39.4. "Even though cro pprices have stabilized, demand for farmland remains weak, pulling agricultural land prices down by an estimated annualized rate of 6% to 8%. This is the 15th straight month the index has moved below growth neutral," states Goss. Even though farm income has weakened, more than one-fifth, or 22.2%, of farmland sales are for cash, according to bankers in February. This is little changed from 23.3% recorded in October of 2014.
The February farm-equipment sales index plummeted to 19.5 from 29.5 in January. The index has been below growth neutral for 19 straight months. "Farmers have become very cautious regarding equipment buying even though their purchases of seeds and other inputs have remained solid," observes Goss. This month bankers were asked to estimate the 2015 change in farm equipment sales for their geographic area. On average, a 14.4% decline in equipment sales is expected by the bank CEOs. Approximately 60% of the bankers expect reductions of more than 15%.
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